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TRADING PSYCHOSIS


Trading Psychosis – The Vendors Dream

I have wanted to address this subject, and after a few beers this Memorial Day weekend, sat down and banged it out. It should resonate with most folks, even traders that have eventually enjoyed success. But I’m simply trying to lay out the mental/emotional workings that surround the difficult process of finding a way to trade successfully. And it includes the role that almost all vendors play in that discovery as they prey upon the relief of pain that’s encountered by those who diligently attempt to master the market.

So, here’s a skeletal breakdown of what typically takes place … 1-16 of what steps the trader experiences as he or she enters the arena of the market.


1. I see how basic the market moves, either up or down, and how easy money can be made.
2. I open an account and trade with an initial strategy and lose money again and again and again.
3. I begin feeling frustrated and feel the PAIN of losing.
4. I don’t question my capability. I know it’s because I don’t have a successful method/strategery.
5. Someone has to be making money and so will I, but I need help.
6. The search: reading trading books and hunting down a good course that promises to teach me how I can make my fortune, or at least a living, for a fee.
7. That nominal multi-grand fee is reasonable since I’ve lost that much in my trading. Whew, thank god I’ve got support now. My PAIN is gone, replaced by relief and excitement.
8. The course marketers/vendors will teach me to make money.
9. But it’s not working, and I’m still trading like a retarded monkey.
10. IT MUST BE MY FAULT because I am obviously not trading the paid-for strategy correctly. They’re doing great, and I hear about it. But I’m still losing.

Reality Check:

It is our nature to accept the FAULT for not using the education we paid for in the right way. We’re too “invested” in it. This is how and why trading education marketers make so much money. They are simply offering to relieve your mental anguish – your PAIN. And any time you don’t achieve success, it’s your fault, not theirs or their method. This is human nature! This cycle of thought is reinforced by the promotional success stories, testimonials and apparent legitimacy of the training or the company.

11. Eventually I finally realize something is rotten in Denmark and not with me.
12. I look for the “real thing” training company/person/mentor/method/chatroom etc.
13. I pay for more education … but that doesn’t work either.
14. At this point I’m even more frustrated, angry and still suffering PAIN!
15. I’ve questioned myself and now question all courses and if anyone really does make money trading.
16. WTF do I do?!?!?!?

I don’t have “the answer,” but I believe that I can offer some useful and real insight into how to maximize your potential success to trade for a living. And let me assure you, I’m very, very qualified to address this subject for numerous reasons. I’ll follow up within the week.

Any and all comments and feedback are welcome here on this thread in the interim. Seriously! They can only help add to the follow up blather that I write, making sure I cover every element of importance and with substance that will hopefully help or assist those who’ve found themselves in the “trading psychosis” loop … as I’ve been there myself a couple of times early on during the past two decades of my own experience in this crazy, challenging and potentially rewarding endeavor.

I've included my regular chart analysis with just a few of the indicators I use to discern market behavior.



Click image for original size
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Above chart is a joke ... my bad! And I had so many more indicators and lines I wanted to draw on it, ha ... but ran out of beer (and time) and have to go to bed. Looking forward to following up on this topic and also some good trading for everyone visiting mypivots and sharing analysis and charts here!
quote:
Originally posted by CharterJoe

Is there any significant advantage to forex over the eminis, or the stock market?



The advantage I recognize is the simplicity of trading cash for cash. The movement of currencies is more to macro economics (obviously) as opposed to performance of equities being coupled to a) corporate management and b) investor sentiment.

My objective is, in concept, quite simple .. 15% per trade, 1, 2, maybe 3 trades / day (Asia open, London open, NY open). I can play with as little as $25, my only transaction cost is the bid/ask spread. In terms of contracts or shares, min play is K$1, typical lots are K$10.
quote:
Originally posted by CharterJoe

Since this is psychosis thread I have been trying for the better part of a year to become a larger contract trader but become frozen and panicked when I trade out of my comfort zone. My trading significantly changes when I go from 3 contracts to 10. I would love to trade a 50-100 lot with the same attitude as I do with 3, and for the record I have never traded over 20 cons I got slammed 3 years ago and still can't mentally get over it, although I recovered most back that day and all back in 3 weeks, I have rewired my thinking to large trading equals large loss. I have tried many times to increase my "size" but to no avail. If any other trader has dealt with this and has found away out I am all ears. I am wondering if the way to it is wake up one morning and say I am going to do a 20, 30, 40 or what ever lot, then going down from there. I still have a calender on my desk of where I ought to be now in # of cons. I had planned to double my base bet every contract change.



I am pretty sure that every trader struggles with this too I know I do. Increasing contracts seems to be a one step forward two steps back kinda dance.

Although this may be of little help it did help me to some degree. I set my DOM to show nothing in the P/L window. Now this doesn't work right away because the calculations are still going on in your brain, but I've found that over a period of several months I stop thinking so much about the dollar value involved. This I think has helped me a little or maybe a lot in adjusting to a larger lot size. I don't think that I will ever return to looking at a P/L again.

This is by no means a cure-all but I do believe it helped me.

Best of luck Joe.
quote:


I am pretty sure that every trader struggles with this too I know I do. Increasing contracts seems to be a one step forward two steps back kinda dance.





Its good to know I am not the only one.
quote:
Originally posted by CharterJoe

Since this is psychosis thread I have been trying for the better part of a year to become a larger contract trader but become frozen and panicked when I trade out of my comfort zone. My trading significantly changes when I go from 3 contracts to 10. I would love to trade a 50-100 lot with the same attitude as I do with 3, and for the record I have never traded over 20 cons I got slammed 3 years ago and still can't mentally get over it, although I recovered most back that day and all back in 3 weeks, I have rewired my thinking to large trading equals large loss. I have tried many times to increase my "size" but to no avail. If any other trader has dealt with this and has found away out I am all ears. I am wondering if the way to it is wake up one morning and say I am going to do a 20, 30, 40 or what ever lot, then going down from there. I still have a calender on my desk of where I ought to be now in # of cons. I had planned to double my base bet every contract change.


Hey Joe,

I think that one of the easiest (or least difficult) ways to increase size (trading-viagra), is to base it upon milestones of equity increase. For example, you initially trade 2 contracts ... when you've increased your equity to X dollar amount, then begin trading 3 contracts. If your equity dips back below that "milestone," then drop back to trading 2 contracts.

Decide in advance what these $ amount milestones will be. So, if you're trading 10 contracts, you know when to begin trading 11, etc. etc. etc.

It's all about two things. You are only adding a contract to your size if you are trading profitably and have built up some money coming into the next milestone ... adds confidence as well. Also, you aren't making a big jump in size, just simply adding 1 contract. This allows you to keep trading "the same way" without the adrenaline/fear-factor creeping in from a big P/L swing (or even tick to tick) if you jumped from 10 straight to 20 or even 15 contracts.

It should be a process, and as smooth as you can design it with pre planning of the milestones where an additional contract would be added to your trade size. I don't know how else to go from 10 to 20 contracts (or 1 to 10 for that matter).

And this approach can be done both for a single entry and exit trading style or crafted around a scaling in/out style. The whole point is to minimize any impact increased position size will have on your normal trading.

And don't forget, there are some folks who, even with a Billion dollar account, would kinda freak out and trade differently beyond a certain contract position size of even 10 or 20 contracts ... just because of other reasons ... because of their personality.

This incrementalism worked for me. I've traded up to roughly 20 contracts, but have found that I'm simply more comfortable and trade more effectively with 8-10 (or less at times). Call me a "working man" blue-collar trader. I'll probably create a milestone trading plan for myself in the near future and see how it unfolds again.

Hope this helps as an idea, Joe!

MM
That sounds like a good idea MM. I had done this very same thing in the past only problem is I may go 2-3 months without pulling money out of my account. And since I make my living only off the markets this would through a kink in the milestone plan cause even though your trading well you may have to decrease 2 or more cons. Which is why I have tried to hit it with double the amount.
I read books like buzzy's pitbull, or lewis borsenellio (spelling??) and they are trading +100 big S&P cons, and thats like 500 ES within 3-5 years of starting trading and makes you think your doing something wrong. I have had two goals in my trading the first is be profitable and the second one is trade 100 cons on a daily basis (without maxing out on day trading margin) and I'm just not going to get there in my comfort zone.
Joe,

I am in the same boat. The most I ever trade are 3 contracts, but that only seems to be on days I lose. On days I trade well I usually have 1 and occasionally 2 contracts.

When I am planning my trades I say if price drops to xxx tomorrow I am going to buy 5 lots. But come morning I am buying 1 lot.

I was trading 6 lots about 1.5 years ago and got caught with my pants down shorting seconds before a news announcement - I had not placed my stop yet and as I was trying the price shot off of the order book. For a solid minute every time i tried to place a new stop the market ran further away from me. Finally I had to cry "uncle" and unload half at market a few thousand away from my desired stop loss. Amazingly with just 3 lots left I calmed down and was able to ride them back up a little (still took a huge hit).

It's been over a year and I have never traded more than 3 lots since. I know that in order for me to convince myself I am a "real trader" I am going to have to get over tis barrier. One of these days I am going to wake up and trade 5 lots, then 8 then 13. Once I do 13 I'll be just fine!

Only time will tell....
This guy must have read my post on page one!

http://www.safehaven.com/article-13993.htm